Aftermarket Repair Opportunities in North America? · Aftermarket Repair Opportunities in North America? - Vehicles - Powertrains - Technology & How the OEM’s are Coming After Our

Aftermarket Trends: What will Drive Future

Aftermarket Repair Opportunities

in North America?

- Vehicles

- Powertrains

- Technology & How the OEM’s are

Coming After Our Customers

Mark Seng

Global Aftermarket Practice Leader

July 29, 2014

Key Driver: Vehicles Miles Traveled (VMT)

Change in Driving Volume

3 Source: IHS Automotive and FHWA

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

2,750

3,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Historical Vehicle Miles Traveled (billions)

First time seeing sustained flat miles driven

under 3 trillion miles since 2007

© 2014 IHS

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Change in Driving Volumes – Year-o-Year

Source: IHS Automotive and FHWA

• 2012 Up 0.3% • 2013 Up 0.6% • ‘07-’13 Down 2%

© 2014 IHS

Source: IHS Automotive, DOT and FHWA

• Total Miles Traveled 2013 = 2004

• Miles per Capita 2013 = 1996

• 1950 – 2004

• Miles traveled + 3.5% per year

• Milles per capita + 2.5%

• Since 2005

• Miles traveled Flat

• Miles per capita -1.0%

Vehicle Miles Traveled – per Capita

© 2014 IHS

Light vehicle sales continue their strong recovery.

The auto industry is back!

© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.

U.S. Light Vehicle Registrations

Source: IHS Automotive

Broke 15 million units last year – 1st time since 2007!

7.5% 15.4 Million


U.S. Light Vehicle Registration Trend


0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F

Mill

ion

s

11.3%

10.2%

13.2%

-22%

-17.5%

7.5%


Fueling the comeback…

Dramatic increase in number of new models and redesigns.

Winners are Offering the Most Options


New Launch Activity

30

43

24 23

20 19 19

25

16

35

27

39

27

33 32

27 27

0

10

20

30

40

50 North American Major Program Launches

Source: IHS Automotive Light Vehicle Production Forecast


150 new models &

redesigns

2010 2012

70%

260 new models &

redesigns

2013 2015

Winners are Offering the Most Options


Includes all model changes

impacting US registrations.


210

220

230

240

250

260

270

280

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

MIL

LIO

NS

VIO will Increase 6.5% by 2019

History Forecast

Aftermarket

U.S. Vehicles In Operation



40%

drop in new vehicle registrations

The market will begin to feel impact of the

Impact of New Vehicle Drop Off


Vehicles

new to 5 years

old grow

32%

Vehicles

6-11 years old

decline

Impact on VIO Age Groups - by 2019

21%

Vehicles

12 + years old

grow

15%

Is the aftermarket “sweet spot” changing?


Aftermarket must be ready for changing vehicles and consumers going into the future

As registrations recover, the vehicle mix continues to evolve


16.6%

15.9%

13.8%

12.1%

NON LUXURY TRADITIONAL MID SIZE

NON LUXURY TRADITIONAL COMPACT

NON LUXURY COMPACT CUV

NON LUXURY FULL SIZE PICKUP

4 Segments Emerging as Dominant: Represent over 58% of all new registrations in 2013



4 Cylinder Engines – Smaller Size but

More Power


US New Vehicle Registrations:

4 Cylinder Engines Gaining in Popularity

All large vehicle segments in

decline except large pickups

Large trucks not

growing as fast as they

once did but segment

remains strong

Add pics of pickups

2012: 50% market share





26.2% 21.3%

39.3%

38.1%

23.6% 26.5%

11.0% 14.1%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2008 2009 2010 2011 2012 2013

% o

f V

eh

icle

s in

Op

era

tio

n

Domestic Car Domestic Truck Imp Car Imp Truck

Changing Mix – Domestic v Import

-5.1%

-0.8%

2.8%

3.1%



-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

2007 2008 2009 2010 2011 2012 2013

Ve

hic

le P

op

ula

tio

n (

x0

00

)

Domestic Cars Import Cars

Cars - Continued Import Strength

-23%

15%



0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

2007 2008 2009 2010 2011 2012 2013

Ve

hic

le P

op

ula

tio

n (

x0

00

)

Domestic Light Trucks Import Light Trucks

Trucks - Imports Gaining Share

-3%

38%



-

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Ve

hic

le P

op

ula

tio

n (

x0

00

)

Domestic Import

VIO Import Growth - Forecast

-15%

89%



Are Millennials Losing Interest in Cars?

11.5%: Millennial

buyers % of total

Percent of Total New Vehicles Registered

Ages:18-34

0%

2%

4%

6%

8%

10%

12%

14%

16%

2008 2009 2010 2011 2012 2013



The Younger Buyer is Broke…

-44%

-6%

+91%

Net worth decline between

2001 and 2010

Income decline between

2001 and 2010

Growth in student loan balance

between 2003 2012

Consumer

Source: Pew Research


The Younger Buyer is Delaying…

22%

20%

24%

Delayed having children

Delayed marriage

Moved back home after college

Consumer

Source: Pew Research


73.4

56.7

62.3

24

30

36

42

48

54

60

66

72

78

84

90

96

Q1

20

04

Q2

20

04

Q3

20

04

Q4

20

04

Q1

20

05

Q2

20

05

Q3

20

05

Q4

20

05

Q1

20

06

Q2

20

06

Q3

20

06

Q4

20

06

Q1

20

07

Q2

20

07

Q3

20

07

Q4

20

07

Q1

20

08

Q2

20

08

Q3

20

08

Q4

20

08

Q1

20

09

Q2

20

09

Q3

20

09

Q4

20

09

Q1

20

10

Q2

20

10

Q3

20

10

Q4

20

10

Q1

20

11

Q2

20

11

Q3

20

11

Q4

20

11

Q1

20

12

Q2

20

12

Q3

20

12

Q4

20

12

Q1

20

13

Q2

20

13

Q3

20

13

Q4

20

13

Ave

rag

e M

on

ths O

wn

ed

Quarter

Average Length of Ownership Trend

New Buyers Used Buyers Total (New and Used)

New & used combined > 22 month increase

in ownership over last 10 years

Length of Ownership Increasing



13 vehicles in a lifetime

Length of Ownership & Delayed Purchase

Impact


9 vehicles in a lifetime

Length of Ownership & Delayed Purchase

Impact

Aftermarket must prepare for new technology entering service bays for years to come

As production grows, OEM powertrains are evolving


Production Outlook North American Light Vehicle Production by Country

10.6

5.6

8.5

11.3

12.0

2.5

1.5

2.1

2.3 1.8

2.0

1.5

2.5

3.2 4.0

0

2

4

6

8

10

12

14

16

18

20

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Outp

ut (M

illio

ns)

Mexico Canada US

-451,000

CAGR = -3.1%

+1,258,000

CAGR = 4.9%

+656,000

CAGR = 0.8%

15.4 16.8

17.8

15.1

8.6

13.1

10.1

2.4

2.9

18.2

11.9

1.8

4.5


2014–2021


Production Outlook North American Vehicle Exports by Region

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Europe

South America

Middle East/Africa

Greater China

Other

No

rth

Am

eri

ca

n V

eh

icle

Ex

po

rts

(M

illio

ns

)

North American Vehicle Exports by Region

0.67

0.91

0.74

0.93

0.78

1.12

1.33 1.39

1.44

1.60

• Greater use of global

platforms allows for

more “export ready”

product

• 40+ Free trade

agreements drive

Mexican output

• EU sovereign debt

crisis tempers EU

exports

• So. America & Middle

East/Africa markets

growing quickly

1.69

Source: IHS Automotive Light Vehicle Forecast


4.94.2

1.93.1 3.4 3.33.2

4.4

2.9

1.9

2.73.2 3.0

2.8

2.9

2.5

0.9

2.0

2.52.32.4

2.4

4.6

3.2

4.1

6.46.7

5.5

0.50.8

0.5

1.0

1.31.9

1.3

0

3

6

9

12

15

18

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

Millio

ns

• Production outlook follows demand recovery with import substitution and export

activity providing additional support

• Most manufacturers are poised to post gains; favors OEMs with further capacity

expansion plans: BMW, VW, Nissan, Toyota & Honda

• Global product/platform strategies enable competitive sourcing shifts

15.6 15.1 German 3

Asian 4

Chrysler/

Fiat

Ford

General

Motors

Others

8.6

13.1

17.3 18.2

15.4

17.2

5.6

4.7

2.9

2.9

0.6


Production Outlook North American Production Mix by Manufacturer


North American Outlook The Old ‘17’ ≠ the New ‘17’

Year 2000 2016

Volume 17.2 million units

(30% of global)

17.7 million units

(19% of global)

Location ~25% built south of Ohio ~50% built south of Ohio

Global Platform

Exposure

20% was deemed global –

mostly Japanese OEMs

62% is deemed global –

mainly pickups are regional

Design Base 72% of volume NA-designed 34% of volume NA-designed

Production

OEMs

Top 5 OEMs = 89% of total

(Largest = 32%)

Top 5 OEMs = 73% of total

(Largest = 19%)


Evolving Powertrains in North America CAFÉ Standards Making an Impact

2016

2025

CAFÉ Standards 54.5 MPG

35 MPG

CAFÉ requirements dominate product and

powertrain planning in the new vehicle industry today


0.3%

Share

2.9%

Share

3.6%

Share

Alternative Powertrains:

Share of U.S. New Registrations - 2013



The Traditional Internal Combustion Engine

• Gasoline direct-injection

• Turbo chargers

• Stop/start capability

• Cylinder de-activation

• AWD disconnect

• More efficient transmissions • more speeds and CVTs

http://www.google.com/url?sa=i&rct=j&q=internal+combustion+engine&source=images&cd=&cad=rja&docid=G6uHyhRQ_HB1QM&tbnid=Zwqd-d1DlMaydM:&ved=0CAUQjRw&url=http://ukmambo.blogspot.com/2011/04/internal-combustion-engine-vs-bike.html&ei=id1dUc3MHIKMygGo6IHYDA&bvm=bv.44770516,d.aWc&psig=AFQjCNEkD0exlHt_wZ07Kt0pRWG_e7JjcQ&ust=1365192444613634


0%

10%

20%

30%

40%

50%

60%

70%

Sto

p S

tart

Mild

Hybrid

Full

Hybrid

PH

EV

EV

GD

I-T

GD

I

DE

-Adv

DE

AC

2012 2025

(Mech. Tech) (Elec. Tech)

Far stronger push on

GDI-T and GAS-HEV

compared to Europe, as

the U.S exit’s 2016

CAFE and approaches

2025 targets

Barriers to diesel

(consumer, CNG, gas

fuel price) remain

‘Mechanical’ opportunity

centred on on re-

segmentation, gasoline

rightsizing and driveline

efficiencies

NAFTA Vehicle Production

– Powertrain Outlook


Aftermarket has the Expertise!

OEM globalization becoming the new norm


million units

83

2013 2020

104 million units

Global VIO Growth – New Registrations



billion units

1

2010 2020

1.5 billion units

Global VIO Growth – Total VIO



Accelerating use of global platforms

Global VIO Growth – Changing OEM

Production Model


2012

2020

Top 12 Manufacturers

212

147

Reducing Number of Platforms



50% fewer platforms

40% fewer

platforms

Reducing Number of Platforms


More Vehicles per Platform

More than double

90% + increase


• Average platform volume to double, volume manufacturers have greatest opportunities

• Premium OEMs lack absolute scale but generate high efficiency

• Toyota, Fiat-Chrysler and GM lag in terms of consolidation

46

New Platform Metrics

3 3

4 4

3 3

6

2

7

3

6

3

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Hyundai Honda VW Ford R/N PSA GM BMW Toyota Suzuki Fiat Daimler

Mill

ion

Un

its

Average volume per platform in 2012

Average volume per platform in 2020

Number of platforms to support 80% of volume in 2020


motortrend.co

m

• Largest single platform

• 6 million units by 2020

• New modular technology revolutionizes production

VW MQB Platform


motortrend.com

88% reduction in engine

transmission variations

20%-30% reduction in parts costs

Modular Architecture


• Lower production costs • Improving inventory efficiency • Reducing cataloging costs

Aftermarket Opportunity

OEM technology Providing both opportunity & challenges


Dealer Service Retention at Record Lows

25%

30%

35%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Retail Non-Warranty Service Retention


Service Retention & Repurchase

Consideration

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

NEW 1 YEAR OLD

2 YEARS OLD

3 YEARS OLD

4 YEARS OLD

5 YEARS OLD

6 YEARS OLD

7 YEARS OLD

8 YEARS OLD

9 YEARS OLD

10 YEARS OLD

11 YEARS OLD

Retail Service Retention (% of revenue returning to dealership for retail service)

Average New Buyer returns to market at

72.1 months:


OEM’s Focused on Service Loyalty KEY: Relationship with Driver of 3-7yr Old Vehicle

Positive connection in repeat buying among those who have vehicles

serviced by OEM dealer network

45.1%

OEM Brand Loyalty Among

Those Servicing with OEM Dealer

Network

28.4%

OEM Brand Loyalty Among

Those Servicing with Aftermarket

Based on actual results from OEM study provided by IHS Automotive. Brand loyalty was measured

among customers with vehicles that were just outside of the traditional warranty period.


Maintenance Programs


Extending Beyond the Basic Warranty


Oil Service Indicator Light


Growing as Part of U.S. VIO

10%

21%



Oil Changes Most common service

opportunity.

Why is This Important to the Aftermarket?


Telematics Hello,

You are due for an oil change.

Touch here to schedule your

appointment.

Driver – Dealer Connectivity


Embrace Technology = Aftermarket Opportunity Aftermarket Must Also Leverage Technology

to Compete for Consumer Loyalty

1. The auto industry is back! Global light vehicle sales continue strong recovery

2. The vehicle mix & the consumer continue to evolve

3. OEM powertrains are evolving

4. OEM globalization becoming the new norm

5. Technology advances bring both challenge AND opportunity

Thank You

Mark Seng

Global Aftermarket Practice Leader

248.728.7350

[email protected]

Documents

Aftermarket Repair Opportunities in North America? · Aftermarket Repair Opportunities in North America? - Vehicles - Powertrains - Technology & How the OEM’s are Coming After Our